Managing Transaction Costs in the Era of Globalization
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Managing Transaction Costs in the Era of Globalization

Frank A.G. den Butter

Frank A.G. den Butter explains the importance and means of keeping transaction costs as low as possible. He illustrates how this transaction management can contribute to making firms and nations more competitive by exploiting gains from the division of labour and international fragmentation of production, and uses relevant case studies to illustrate how value is created by reducing transaction costs. Policy recommendations for strengthening the competitive position of trading nations and reducing implementation costs of government policy are presented, and management methods for creating value in organizing production on a global scale are prescribed.
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Chapter 11: Conclusion

Frank A.G. den Butter


This chapter recapitulates the meaning and significance of managing transaction costs in nations where the focus is on the organization of production and on being competitive as a hub in international trade. These nations can be characterized as transaction (or orchestration) economies, and the skill of reducing transaction costs is labelled transaction management. This final chapter provides a kind of checklist of what knowledge is needed for effective transaction management, and how value can be created by exploiting the gains from the worldwide division of labour in this era of globalization. This book outlines the pivotal role of the skill of reducing transaction costs in modern open economies where welfare creation depends on trade and the organization of production. First, the characteristics of a transaction economy (or orchestrating economy) are reviewed in a number of statements. Then, the role of transaction management as a key competence for government and industry in such a transaction economy is summarized. A precise definition, in one sweeping statement, of a transaction economy (or orchestrating economy) cannot be given. That is because transaction economies have different characteristics. For instance, Chapter 3 on the hub function of some selected transaction economies shows that The Netherlands and Belgium, nations with a long maritime tradition, act as purchasers in the world and as suppliers to the rest of Europe. Singapore has a similar role in East Asia. On the other hand, land-locked Switzerland, a big exporter of financial and business services, buys in Europe and sells to the rest of the world.

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